Are Troubled Miners Barrick Gold Corp. or Teck Resources Ltd. Right for Your Portfolio?

Both Barrick Gold Corp. (TSX:ABX)(NYSE:ABX) and Teck Resources Ltd. (TSX:TCK.B)(NYSE:TCK) have had their fair share of problems. Should you buy either one?

The Motley Fool

Barrick Gold Corp. (TSX: ABX)(NYSE: ABX) and Teck Resources Ltd. (TSX: TCK.B)(NYSE: TCK) have both had a rough three years. Over this time, the two companies’ stocks have fallen by 66% and 33%, respectively.

Each has had its share of problems, to say the least. But are these companies ripe for a turnaround? Below, we take a look.

The case for Barrick Gold

Barrick’s wounds are very deep, and are much more self-inflicted than those at Teck Resources. The company has spent an enormous amount of money on an acquisition in Africa (Equinox) and a project in South America (Pascua Lama), both of which have ended in disaster. To make matters worse, gold prices have fallen from nearly $1,900 per ounce in 2011 to just over $1,200 today.

As a result, Barrick has an overstretched balance sheet, which is really hampering the company. Mines have had to be sold off (right into a buyer’s market). Capital plans have had to be deferred. And with production shrinking, in addition to the share price, morale is very low.

There is some good news: Barrick will not be expanding internationally for quite some time. Now the company is in scale-down mode, determined to right the ship. But that leads to bad news: The company has little ability to focus on the long term. And if gold prices do eventually recover, Barrick may not be able to take full advantage.

So at this point, there are just too many problems with Barrick today. Your best bet is a wait-and-see approach with this company.

The case for Teck Resources

Like Barrick, Teck Resources has a history of missteps. The most notable was the disastrous $14.5 billion takeover of Fording Coal in 2008, right before the financial crisis erupted. The move nearly bankrupted Teck.

But more recently, Teck’s falling share price is not the company’s doing. In fact, Teck has stayed relatively disciplined in recent years. The real problem has been China, where slowing growth has slashed commodity prices. This is especially relevant with steelmaking coal, which is where Teck makes about half its profit.

To be more specific, steelmaking coal prices have fallen by more than half in the last three years. And there’s a real possibility that prices will continue to fall — this will happen if China’s building construction slows, which many observers believe has to happen.

So at this point, Teck is really a bet on China. But that is a very risky bet as well, and your money is probably better suited for safer investments.

The verdict

Both of these companies are incredibly risky, and should probably be avoided. If you’re looking for better alternatives, five are detailed in the free report below.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

More on Metals and Mining Stocks

Hand writing Time for Action concept with red marker on transparent wipe board.
Metals and Mining Stocks

3 No-Brainer Copper Stocks to Buy With $200 Right Now

Are you looking for growth? These three copper stocks have been on a tear, with even more predicted in 2024…

Read more »

Target. Stand out from the crowd
Metals and Mining Stocks

3 No-Brainer Stocks to Buy Under $30

Lower-priced TSX stocks such as Air Canada, Kinross Gold, and Saputo trade at compelling valuations in 2024.

Read more »

growing plant shoots on stacked coins
Stocks for Beginners

Long-Term Investing: 3 Top Canadian Stocks You Can Buy for Under $20 a Share

If you're looking for growth, look for cheap stocks in the right sector. And these three Canadian stocks offer exactly…

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Energy Stocks

Cameco Stock and More: 3 TSX Commodity Titans to Watch in 2024

Cameco stock (TSX:CCO) has seen its share price surge this year, but there are also other commodity stocks I would…

Read more »

Metals and Mining Stocks

2 Sizzling Hot Stocks to Buy Right Now

Teck Resources and Agnico-Eagle Mines are two stocks that are soaring this year. Check out why they're likely to continue…

Read more »

Gold bullion on a chart
Energy Stocks

Have $500? 2 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

Torex Gold Resources (TSX:TXG) stock and one undervalued TSX energy stock could rise as identified scenarios play out.

Read more »

Safety helmets and gloves hang from a rack on a mining site.
Metals and Mining Stocks

Here Are 3 Phenomenal Reasons to Buy Lundin Stock Right Now

Lundin stock (TSX:LUN) has seen its share price climb higher from external and internal factors that are enough to make…

Read more »

silver metal
Metals and Mining Stocks

Forget Gold: This Other Metal Is Sure to Soar Higher!

The price of gold continues to hit the headlines, but this material is also making waves and should continue to…

Read more »